Standard and enhanced due diligence differ in the assurance required and the measures applied to obtain it. The practical issue is whether the existing review addresses the relevant risk, or whether a defined aspect requires additional scrutiny.
Terminology and scope
Here, standard due diligence means the baseline review appropriate to the relationship. It does not mean simplified due diligence, and it is not synonymous with automated screening. Standard customer due diligence can itself require judgment and verification; enhanced review adds measures in response to the relevant circumstances.
For regulated relationships, applicable requirements take precedence over a discretionary commercial assessment. The FCA's guidance connects the extent of enhanced measures with the risks involved. A decision to limit a research brief cannot waive measures that are required. FCA Financial Crime Guide, section 3.2.
How the assessment changes
| Dimension | Standard review | Enhanced review |
|---|---|---|
| Scope | The baseline information and verification appropriate to the relationship. | Additional measures addressing the particular risk or unresolved proposition. |
| Evidence | Evidence sufficient for the baseline assessment and applicable requirements. | Further corroboration or context where the baseline evidence is insufficient. |
| Exceptions | Discrepancies assessed within the normal review and referral process. | Material exceptions examined explicitly and reflected in the conclusion. |
| Decision record | The basis for the assessment and any remaining conditions. | The reason for enhancement, additional findings and residual exposure. |
The reason for escalation
Escalation is most useful when its purpose is explicit. A vague concern about a counterparty's profile gives little direction. A specific uncertainty about an ownership interest, a material representation or the explanation for a transaction creates a reviewable question.
The consequence of error matters, but value alone does not define the scope. A large, transparent transaction and a smaller relationship involving an unresolved conflict may require different attention. Nor does an unfamiliar jurisdiction establish misconduct; it may affect the availability, interpretation or reliability of the evidence.
Three illustrative decisions
A consistent supplier renewal
The contracting entity, ownership and nature of supply remain consistent with the previous assessment. Current checks resolve the relevant questions and identify no new risk requiring enhancement. Subject to applicable requirements, the existing level of review may remain appropriate. Additional research is not an end in itself.
A material change in funding
An investment previously described as self-funded will now involve another entity. The change creates a specific question about the funder's identity, interests and role. An enhanced review can address that change without treating every previously established fact as equally uncertain.
A discrepancy that is resolved
A counterparty's description of a previous appointment differs from the initial record. Further evidence establishes the role and explains the date difference. The discrepancy can be recorded as resolved rather than retained as an adverse indicator merely because it prompted enquiry.
These are hypothetical commercial examples, not regulatory classifications or substitutes for a client-specific assessment.
Recording a proportionate conclusion
The decision record should connect the reason for escalation with the findings. If additional review resolves the issue, that resolution deserves the same prominence as the original concern. If it does not, the remaining uncertainty should be stated precisely, alongside its relevance to the proposed relationship.
The substance of enhanced review is discussed in What Is Enhanced Due Diligence?; Carratu's service page describes the support available for a defined brief.
Continue with the full analysis
For sourced analysis, practical examples and further context, read the related report.
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